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Microsoft Rides cloud strength and signals will follow



Microsoft Corp.


MSFT 2.11%

has expanded its earnings record in the last quarter and signaled further strength in the coming months as the software giant moves into an era in which its venerable Windows franchise plays a supportive role for its skyrocketing cloud computing operations are playing

The Azure cloud business rose 93 percent in the third quarter, Microsoft announced Thursday. The company has never grown more slowly than 90% since the company began measuring metrics in October 201

5. The other major part of the company's cloud operations, the commercial version of its Office 365 online productivity service, grew 42%.

Microsoft does not announce any sales for both companies, but in the previous second quarter, Azure increased 98% and Commercial Office 365 41%.

The two companies together generated $ 6 billion in revenue, 58% more than Microsoft Chef

Amy Hood

said, was "better than expected demand."

wife. Hood pointed to a 20 percent increase in Microsoft's server products and cloud services revenue as it focuses on the hybrid cloud, where customers combine cloud services with software running on servers in their own data centers.

on his legacy as a server software vendor to win over his longtime customers, who decide to gradually move their operations to the cloud.

This growth has driven Microsoft into the role of chief cloud rival

Amazon.de
Inc.,

that began a decade ago as a pioneer in computing and memory leasing. In the first three months of 2018, Amazon accounted for 31.7% of the cloud infrastructure market, while Microsoft had 16% and Google 7.4%, according to market research firm Canalys.

"Two years ago, there was a clear No. 1 with no clear number 2," said Stifel Nicolaus & Co. analyst

Brad Reback.

"There is no doubt that Microsoft has distanced itself a great deal from itself and all of the other Amazon rivals."

The rising cloud business led Microsoft to a 35% increase in profits to $ 7.42 billion, or 95 cents Earnings Up 16% to $ 26.82 Billion S & P Global Market Intelligence Analysts Expected Microsoft Earnings Per Share at $ 0.85 Per Share for Revenues of $ 25.78 Million

Microsoft reports no restated figures reflecting the changes in accounting at the beginning of the fiscal year, reflecting the change from the prior year

The stock climbed 3.2% after the close to $ 97.41. After the firm made a strong forecast for the current fourth quarter, Hood expects the Productivity and Business Processes segment, which includes Office, to outperform 9% to $ 9.55 to $ 9.75 billion. The Azure unit, the Intelligent Cloud segment, is expected to grow by approximately 22% to between $ 8.95 and $ 9.15 billion.

It even predicted growth of approximately 18 percent in revenue from $ 10.3 to $ 10.6 billion for the often sluggish More Personal Computing segment, which includes Microsoft's Windows franchise

Last month Microsoft shares reached an all-time high of $ 96.77, up nearly 40 percent last year. The company has fought for second place with Alphabet Inc. and Amazon

Apple

Inc. is the world's most valuable company in terms of market capitalization.

Intelligent Cloud segment revenue increased 17% to $ 7.9 billion. Productivity and Business Processes revenue increased 17% to $ 9.01 billion.

The company continues to invest huge sums to build huge data centers around the world to fight Amazon and others. For the quarter, Microsoft spent $ 3.5 billion on capital costs, much of which was spent on expanding the data center. A year ago, Microsoft had $ 2.1 billion worth of investments

Microsoft is not making any revenue from its Windows business. Earlier this month, International Data Corp. announced Worldwide PC shipments that did not grow in the last quarter.

Sales in Microsoft's More Personal Computing segment, which includes Windows, as well as the mobile and Xbox gaming businesses, increased 13% to $ 9.92 billion.

A month ago, Microsoft separated from the engineering group, which develops Windows banners between two separate departments. It was a recognition that the product, which has been synonymous with Microsoft for 43 years, will now play a supporting role in the company's cloud computing efforts.

Even though Microsoft has shifted its focus away from Windows, the operating system showed surprising elasticity. Sales in the version of Windows that Microsoft generally sells to corporate customers, known as OEM Pro, increased 11%. And revenue from the Microsoft Surface computer line increased 32% to $ 1.10 billion.

LinkedIn, the professional social network that bought Microsoft for $ 27 billion more than a year ago, grew at a rapid rate, with revenue rising 37% to $ 1.34 billion. "The results exceed all expectations" of the LinkedIn business, Microsoft Chief Executive

Satya Nadella

said during a call with analysts. That has increased the advertising revenue for the business, he said.

Write to Jay Greene at [email protected]

Published in the printed edition of April 27, 2018 as "Microsoft Booyed by Cloud".


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